Interest rates may have to be slashed to zero as Britain battles to avoid a full-blown depression, one of the country’s leading economists warns today.

A d v e r t i s e m e n t

The extraordinary claim from Charles Goodhart, a founding member of the Bank of England’s Monetary Policy Committee, came as Gordon Brown signalled that he wants to see further, aggressive cuts in the cost of borrowing.

Mr Goodhart, professor emeritus of banking and finance at the London School of Economics and a member of the MPC between 1997 and 2000, tells Channel 4′s Dispatches programme: ‘Interest rates will go down from now, by how far and how fast
nobody knows.

‘They could go to zero. They went to zero in Japan in the 1990s when the Japanese had a recession or depression which went on for a long time and was quite severe.’

Such a drastic move here would bring rates, currently 4.5 per cent, to their lowest level since the Bank of England was founded in 1694.